Tuesday, August 28, 2012

Keynes may have had a few valuable ideas concerning the state acting as a stabilising factor in the economy between cycles of booms and recessions. However, what has happened since his theories were launched is that a rather profound dimension has emerged – a dimension that has managed to be ignored as the West still had quite a lot of competitive industry and still was seen as the king of the hill, and thus could build up debts in order to keep living on high standards of living.

That is no longer possible. As our productive part of the economy is diminishing when industry is moving to other parts of the planet, state revenue decreases. Rather than making the necessary structural reforms to make our part of the world less expensive (ie. living on less), in order to attract the production and refining back to the West, many argue the opposite policy – propping up the economy with more public funds (ie. living on what we do not have), in accordance with Keynesian theory. Furthermore, when the same people talk of an economy in balance they often refer to debt versus GDP. Here no distinguishment is made between publicly funded salaries, of which taxation means a few extra laps in the state budget – and non publicly funded salaries, of which taxation means real contribution to the revenue of the state. In conclusion a question lingers: Is it Keynes or having been spoilt that has made us blind to the very foundation of economy – income and expense?

For us who see parts of the publicly funded welfare state as good inventions, such naivety is sad. It hinders realistic politics and administration for preserving its important core, and it leaves an ever increasing bill for the future. “In the Long Run We Are All Dead” is not a very moral standpoint resting on the contract between generations, is it?

Sunday, August 26, 2012

A problem with much contemporary parlance is that it does not differentiate the usage of the word "capitalists" enough. On one hand we have entrepreneurs, industrialists and merchants and on another complacent economic elites watching each other's backs, demanding the central banks to print money in order to secure something not lasting. The former ones are much needed to create wealth, which is necessary if you want welfare. The latter ones are an obstacle for the creative destruction needed to maintain wealth, which is necessary if you want welfare.

Some hundred years ago people in our part of the world starved ever so often. During industrialisation we built up riches and today, when much of the industry has moved elsewhere, many argue the case that we could keep the wealth without devoting a thought to industrial work. Somehow we should spend our time being knowledge-intensive, let others toil and get away with it. The morale seems to have vanished with the affluence. What is more, at parts the analysis seems rather colonial to yours truly.

"If I have seen further than others, it is by standing upon the shoulders of giants"(Sir Isaac Newton)

"you chose to act as if you had never been molded into civil society and had everything to begin anew. You began ill, because you began by despising everything that belonged to you."(Edmund Burke in Reflections on the Revolution in France)

"Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve"(Sir Karl Popper)

Liberty is, of course, a loftier goal. But only those who have never known disorder fail to grasp that [order] is the necessary precondition for liberty."(Niall Ferguson in Colossus)

"When every benefit received is a right, there is no place for good manners, let alone for gratitude."(Theodore Dalrymple in What is Poverty?)

"If we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend a tolerant society against the onslaught of the intolerant, then the tolerant will be destroyed, and tolerance with them. // We should therefore claim, in the name of tolerance, the right not to tolerate the intolerant."(Sir Karl Popper on the paradox of freedom in The Open Society and Its Enemies)

"Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good. // The amazing thing is that this history of failure and disaster has neither discouraged the social engineers nor discredited them."(Thomas Sowell in Is Reality Optional?)

"Government has become ungovernable; that is, it cannot leave off governing. Law has become lawless; that is, it cannot see where laws should stop."

(G.K. Chesterton in Eugenics and Other Evils: An Argument Against the Scientifically Organized State)

"to take part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress."(The aim of The Economist)"This is the lesson: Never give in. Never give in. Never, never, never, never - in nothing, great or small, large or petty - never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy."(Sir Winston Churchill, October 29th 1941, Harrow School , London)